Roth IRAs

A Roth IRA is a unique retirement savings account that offers different tax incentives to boost your retirement savings when compared to traditional IRAs. With a Roth IRA you make contributions to your account that are not tax deductible, but all the money you contribute can be withdrawn at any time without incurring any tax or penalties if you need it. The earnings on your contributions may also be withdrawn on a tax-free basis if certain qualifications are met. An OregonSaves Roth IRA can provide you with a flexible way to save and can help you build a source of tax-free income to be drawn on in your retirement.

Contributing to your OregonSaves Roth IRA

You can contribute up to $5,500 per year to a Roth IRA (and $6,500 per year when you are age 50 or older) as long as you earn that much in wages. You are eligible to contribute to a Roth IRA if:

You (or your spouse if filing a joint tax return) earn compensation from employment, and

Your earned modified adjusted gross income (MAGI) (or you and your spouse’s combined MAGI if filing a joint tax return) is less than or within the applicable IRS limits.

Modified Adjusted Gross Income (MAGI) Limits

Year

Single Filer

Married/Joint Filer

Married/Single Filer

2017

$118,000–$133,000

$186,000–$196,000

$0–$10,000

2018

$120,000–$135,000

$189,000–$199,000

$0–$10,000

If your MAGI falls between the applicable MAGI limits for the year, then the amount you can contribute to a Roth IRA is reduced or “phased out.” To determine your reduced contribution limit for the year, (1) subtract your MAGI from the appropriate MAGI phase-out maximum for the applicable year; (2) divide this total by $15,000 ($10,000 if filing a joint return, qualifying widow(er), or married filing a separate return and you lived with your spouse at any time during the year); and (3) multiply this number by the maximum allowable contribution for the applicable year, including catch-up contributions if you are age 50 or older.

If you have other Roth or traditional IRAs in addition to your OregonSaves Roth IRA, the amount you can contribute to your OregonSaves Roth IRA will be further reduced by the contributions you make to your other Roth or traditional IRAs. You can still contribute to all of them; however, you are responsible for ensuring that the total contributions to all of your IRAs do not exceed the annual contribution limits. Keep in mind that the annual contribution limit applies to all of your IRAs combined—rather than on a per IRA basis.

If you contribute to an employer sponsored retirement plan with another employer, the amount you contribute to your OregonSaves Roth IRA will not affect the amount you can contribute to your employer-sponsored retirement plan.

Another great benefit of making a contribution to a Roth IRA is that if your income falls within certain limits you may be able to qualify for the Saver's Tax Credit of up to $1,000. This may reduce the amount of tax you owe for a particular year.

Moving your Roth IRA

A Roth IRA also allow you the flexibility to move your money if you decide your savings is not where you want it to be. If you would like to move your savings in your OregonSaves Roth IRA, you are able to transfer or roll it over to an established Roth IRA at a different financial organization at any time. You can simply submit a request for a transfer on the OregonSaves web portal, and your Roth IRA will be sent directly to your new financial organization for deposit in your established Roth IRA. Alternatively, you can request a distribution of your OregonSaves Roth IRA on the OregonSaves web portal and the funds will be distributed to you. You will then have 60 days to roll over your money to your established Roth IRA with your new financial organization. Keep in mind that the IRS limits you to one rollover in any 12 month period. This one-rollover-per-year limit applies to all of your IRAs (both traditional and Roth IRAs).

You can withdraw the contributions you have made tax-free at any time. Since any money you take out will be considered to come from your contributions first, you will not be subject to tax or penalties consequences if you simply withdraw these amounts.

If you want to withdraw more than what you have contributed then you must meet two requirements to get your earnings tax and penalty free. First, five years must have passed since the first year in which you made a contribution to any Roth IRA. Second, one of the following conditions must apply:

The distribution is made after you have attained age 59½ or older

The distribution is made on account of your disability

The distribution is used to buy, build or rebuild your first home (up to a $10,000 lifetime limit)

The distribution is made to your beneficiary after your death

Please keep in mind that there is a set order in which contributions and earnings are considered to be distributed from your Roth IRA. In applying the ordering rules, you must (1) aggregate all Roth IRAs you own, (2) aggregate all distributions made during the year, (3) disregard excess Roth IRA contributions and related earnings, and (4) disregard rollover contributions from other Roth IRAs. The tax rules governing Roth IRAs are complex. We encourage you to consult with a qualified tax advisor to discuss your particular circumstances.

If you take money out of your Roth IRA that represent earnings before you turn age 59 1/2, a 10% early distribution penalty tax may apply, unless you meet one of the IRS early distribution penalty exceptions.

Early Distribution Penalty Tax Exceptions

Age 59½ or older

Death

Disability

Substantially equal periodic payments

Certain medical expenses

Health insurance if unemployed

Higher education

First-time homebuyer

IRS levy

Qualified reservist status

No Required Minimum Distributions

Another benefit of Roth IRAs is that while you have the flexibility to access your money, there are no requirements for you to take required minimum distributions. Unlike traditional IRAs, you are not required to take minimum distributions from a Roth IRA when you reach a certain age. If you don’t need the money, you can let your assets continue to grow potentially tax-free for as long as you like.

In addition, if you do not withdraw your Roth IRA assets before you pass away, you can leave the Roth IRA to anyone by designating one or more beneficiaries. Your beneficiary would have the option of taking a lump-sum distribution or receiving payments from the account over a number of years, subject to the required minimum distribution rules that apply to beneficiaries. The money would be available to your beneficiary tax-free as long as five years have passed since the first year you contributed to a Roth IRA.

Individuals have not received compensation for their testimonial. Testimonials may not be representative of the experience of other customers.

OregonSaves is overseen by the Oregon Retirement Savings Board. Ascensus College Savings Recordkeeping Services, LLC (“ACSR”) is the program administrator. ACSR and its affiliates are responsible for day-to-day program operations. Participants saving through OregonSaves beneficially own and have control over their Roth IRAs, as provided in the program offering set out at saver.oregonsaves.com.

OregonSaves’ Portfolios offer investment options selected by the Oregon Retirement Savings Board. For more information on OregonSaves’ Portfolios go to saver.oregonsaves.com. Account balances in OregonSaves will vary with market conditions and are not guaranteed or insured by the Oregon Retirement Savings Board, the State of Oregon, the Federal Deposit Insurance Corporation (FDIC) or any other organization.

OregonSaves is a completely voluntary retirement program. Saving through a Roth IRA will not be appropriate for all individuals. Employer facilitation of OregonSaves should not be considered an endorsement or recommendation by your employer of OregonSaves, Roth IRAs, or these investments. Roth IRAs are not exclusive to OregonSaves and can be obtained outside of the program and contributed to outside of payroll deduction. Contributing to an OregonSaves Roth IRA through payroll deduction offers some tax benefits and consequences. You should consult your tax or financial advisor if you have questions related to taxes or investments.

The OregonSaves mark and OregonSaves logo are trademarks of the Oregon Retirement Savings Board and may not be used without permission.